Executives of five large oil companies are attacking proposals to cut $4 billion in annual U.S. government subsidies, even as their profits have soared and American motorists are facing near-record prices at gasoline pumps.
The chief executive of Exxon Mobil, Rex Tillerson, told a congressional panel on Thursday that the proposed tax change is "misinformed and discriminatory" and would be "counterproductive." He said if the subsidies are ended, it would discourage future investment in U.S. energy projects and undermine the creation of more jobs and economic growth.
Tillerson and chief executives from BP, Shell, Chevron and Conoco Phillips appeared before a Senate committee to voice their opposition to a plan supported by President Barack Obama and numerous Democratic lawmakers to end the subsidies. The president and lawmakers say the money should be used to cut the government's burgeoning deficit, but many Republican lawmakers and some oil-state Democrats have sided with the oil companies.
The Democratic lawmakers say the major oil companies no longer need the government subsidies at a time when they reported huge increases in profits in the first three months of the year. Exxon, the world's biggest oil company, said its earnings increased 69 percent in the first quarter compared to a year ago, jumping to $10.7 billion. The increase in oil profits has coincided with three-year highs in pump prices for consumers, now at an average of more than $1 a liter (nearly $4 a gallon).
The irony of the debate is that economists say that if the subsidies are ended, gas prices would not be cut. But the profits of the oil companies would be.
Tillerson said that neither his company nor oil majors set oil prices, which he said rise and fall based on world demand.
The recent substantial run-up in the price of crude oil has largely been fueled by countries with emerging economies buying more oil to foster their economic growth and because of political turmoil across the oil-producing countries in the Middle East and North Africa. Libya's production is not expected to resume this year.
The International Energy Agency said Thursday that the large increases in oil prices may continue.
But the Paris-based agency of 28 mostly Western nations said the higher prices are trimming demand somewhat, down nearly 200,000 barrels a day from earlier projections. Nonetheless, the agency said the demand for oil will still grow this year by 1.5 percent, to more than 89 million barrels a day.